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Category: Schmitt Industries
Date: 15 January 2021 Stock price of Schmitt (SMIT): $5.41 We take a look at the 2nd quarter 2021 earnings report of Schmitt Industries (SMIT) a company that designs, manufactures and sells high precision test and measurement products, solutions and services through its Acuity® and Xact® product lines. For the quarter the company reported revenues of $2.029 million and made a net loss of -$2.215 million.
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Michael Zapata, Schmitt's Chairman and Chief Executive Officer - In the second quarter of fiscal year 2021 continued our focus on stabilization and building a strong foundation for our businesses. At Ample Hills Creamery, we are investing in both our assets and our people. We approved a capital project to upgrade our equipment and improve production efficiencies at our iconic Red Hook factory"
More About Schmitt Industries
Schmitt Industries, Inc., Schmitt Industries, Inc., (“Schmitt” or the “Company”) founded in 1987, designs, manufactures and sells high precision test and measurement products, solutions and services through its Acuity® and Xact® product lines. Acuity provides laser and white light sensor distance measurement and dimensional sizing products, and our Xact line provides ultrasonic-based remote tank monitoring products and related monitoring revenues for markets in the Internet of Things environment. The Company also owns and operates Ample Hills Creamery, a beloved ice cream manufacturer and retailer based in Brooklyn, NY
Overview of Schmitt Industries (SMIT) 2nd quarter 2021 earnings report
- Consolidated revenues increased $996,610, or 96.5%, to $2,029,712 for the three months ended November 30, 2020, as compared to $1,033,102 for the three months ended November 30, 2019. For the six months ended November 30, 2020, consolidated revenues increased $1,409,318, or 66.2%, to $3,537,197, as compared to $2,127,879 for the six months ended November 30, 2019.
- The company's newly formed Ice Cream Segment's first full quarter of operations generated revenues of $1,158,989 for the three months ended November 30, 2020. From the date of the Company's acquisition of Ample Hills on July 9, 2020 through November 30, 2020, the ice cream segment generated revenue of $1,660,409.
- Measurement Segment revenue decreased $162,379, or 15.7%, to $870,723 for the three months ended November 30, 2020, as compared to $1,033,102 for the three months ended November 30, 2019. Measurement Segment revenue decreased $251,092, or 11.8%, to $1,876,788 for the six months ended November 30, 2020, as compared to $2,127,880 for the six months ended November 30, 2020. The decreases are primarily due to a $33,202, or 9.0%, decline in sales of the Company's Acuity products for the three months ended and $112,747, or 13.8%, for the six months ended November 30, 2020. Recurring revenue from the Company's Xact products monitoring services continued to grow, increasing $39,158, or 10.3%, to $420,133 for the three months ended November 30, 2020 and $59,754, or 8.0%, increase to $808,570 for the six months ended November 30, 2020, as compared to the three and six month periods ended November 30, 2019. The increase in Xact product monitoring services was offset by a decrease in Xact product sales of $122,917, or 56.6%, to $94,413 for the three months ended and $120,968, or 28.2%, decrease to $307,406 for the six months ended November 30, 2020.
- Gross margin increased to 47.4% for the three months ended November 30, 2020, as compared to 37.7% for the three months ended November 30,2020. Gross margin increased to 44.4% for the six months ended November 30, 2020 as compared to 40.7% for the six months ended November 30, 2019. The increase in gross margin is due to the start-up of the Ample Hill's factory and the decline in lower margin Acuity sales.
- Operating expenses increased $2,110,785, or 211.4%, to $3,109,392 for the three months ended November 30, 2020, as compared to $998,607 for the three months ended November 30, 2019. The increase was primarily due to the inclusion of the Ample Hills business along with increased stock compensation, professional fees, and investments in information technology.
- Net loss from continuing operations was $2,366,469, or ($0.63) per share, for the three months ended November 30, 2020, as compared to a net loss of ($599,058), or ($0.15) per share, for the three months ended November 30, 2019. Net loss from the continuing operations was $2,215,810, or ($0.59) per share, for the six months ended November 30, 2020, as compared to a net loss of ($821,185), or ($0.20) per share for the six months ended November 30, 2019. Excluding the $1,189,512 bargain purchase gain realized as a result of the acquisition of Ample Hills, stock-based compensation, transaction fees and re-organization expenses, and income from discontinued product lines, non-GAAP earnings per share from continuing operations for the three months was $(0.59) and $(0.82) for the six months ended November 30, 2020.
- Adjusted EBITDA decreased $2,120,611, to ($2,132,309), for the three months ended November 30, 2020, as compared to ($11,698) for the three months ended November 30, 2019. For the six months ended November 30, 2020, Adjusted EBITDA decreased $3,199,214 to $3,301,839, as compared to ($102,625).
Schmitt Industries management commentary 2nd quarter 2021 earnings report
PORTLAND, Ore., Jan. 14, 2021 /PRNewswire/ -- Schmitt Industries, Inc. (NASDAQ: SMIT) (the "Company" or "Schmitt") today announced its operating results for the fiscal quarter ended November 30, 2020. The operating results for the six months ended November 30, 2020 include first quarter financial results from Schmitt's July 9, 2020 acquisition of Ample Hills Creamery ("Ample Hills").
The Company finished the quarter ended November 30, 2020 with $7,337,469 in cash, as compared to $10,566,531 for the year ended May 31, 2020.
Michael Zapata, Schmitt's Chairman and Chief Executive Officer, commented, "The second quarter of fiscal year 2021 continued our focus on stabilization and building a strong foundation for our businesses. At Ample Hills Creamery, we are investing in both our assets and our people. We approved a capital project to upgrade our equipment and improve production efficiencies at our iconic Red Hook factory, while also focusing on cost reduction in our purchasing practices. At our 10 retail locations, we've implemented new ice cream and cabinet management training while supporting and protecting our employees. As we move forward, we will continue to focus on building our brand, expanding our wholesale and e-commerce presence, and identifying strong co-pack partners for our Red Hook factory.
The Company finished the quarter ended November 30, 2020 with $7,337,469 in cash, as compared to $10,566,531 for the year ended May 31, 2020.
Michael Zapata, Schmitt's Chairman and Chief Executive Officer, commented, "The second quarter of fiscal year 2021 continued our focus on stabilization and building a strong foundation for our businesses. At Ample Hills Creamery, we are investing in both our assets and our people. We approved a capital project to upgrade our equipment and improve production efficiencies at our iconic Red Hook factory, while also focusing on cost reduction in our purchasing practices. At our 10 retail locations, we've implemented new ice cream and cabinet management training while supporting and protecting our employees. As we move forward, we will continue to focus on building our brand, expanding our wholesale and e-commerce presence, and identifying strong co-pack partners for our Red Hook factory.
"In our SMS Measurement segment, we redesigned our Acuity website and Xact portal for an improved customer service experience while continuing to build our sales pipeline and implementing production process improvements. Despite uncertain economic conditions, our teams have maintained discipline in execution and will continue to do so as we enter the new year."
Shareholder Rights Plan
As previously disclosed, the Schmitt Board of Directors ("Board") believes the Section 382 Rights Agreement ("Agreement") that was implemented in 2019 has served its purpose of preserving the Net Operating Losses ("NOLs") so they could be used to offset cash taxes for shareholders. Effective January 14, 2021, the Board has approved for the removal of the Agreement, which it believes is in the best interest of shareholders and appropriate corporate governance.
Real Estate Update
Schmitt listed the 28th Street building for sale on December 18, 2020. There is no certainty or timing of the sale of this property.
Shareholder Rights Plan
As previously disclosed, the Schmitt Board of Directors ("Board") believes the Section 382 Rights Agreement ("Agreement") that was implemented in 2019 has served its purpose of preserving the Net Operating Losses ("NOLs") so they could be used to offset cash taxes for shareholders. Effective January 14, 2021, the Board has approved for the removal of the Agreement, which it believes is in the best interest of shareholders and appropriate corporate governance.
Real Estate Update
Schmitt listed the 28th Street building for sale on December 18, 2020. There is no certainty or timing of the sale of this property.
Schmitt Industries (SMIT) stock price chart over the last 5 years
The image below shows the stock price history of Schmitt Industries (SMIT) over the last 5 years. And its been a good time for Schmitt stockholders with the stock increasing by 149.2% over the last 5 years. No investor would say to those kind of returns.
The stock of Schmitt Industries is trading at closer to its 52 week high than it is to its 52 week low which is an indication that the short term sentiment and momentum of Schmitt (SMIT) stock is positive at this point in time.
The stock of Schmitt Industries is trading at closer to its 52 week high than it is to its 52 week low which is an indication that the short term sentiment and momentum of Schmitt (SMIT) stock is positive at this point in time.
Latest stock valuation of Schmitt Industries
So what is Schmitt stock worth based on their 2nd quarter 2021 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Schmitt (SMIT) at $4.20 a stock.
We therefore believe the stock of Schmitt is overvalued at its current price of $5.14
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $4.20, thus a good entry point into Schmitt would be at $3.90 or below.
We expect the stock of Schmitt (SMIT) to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued
We therefore believe the stock of Schmitt is overvalued at its current price of $5.14
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $4.20, thus a good entry point into Schmitt would be at $3.90 or below.
We expect the stock of Schmitt (SMIT) to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued
Next earnings release of Schmitt Industries
It is expected that Schmitt (SMIT) will release their 3rd quarter 2021 earnings report in early April 2021
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